Bank of East Asia (BEA), Hong Kong's fifth-largest bank, has optimistic expectations for its mainland operations after the market helped it post a 25.1 percent growth in earnings last year.

Its better-than-expected annual results beat market expectations, which predicted a 17 percent increase. The lender now forecasts profit contributions from its mainland operations will double to 30 percent in five years.

BEA, whose financial results often influence share prices in the overall sector, said profit from its mainland operations surged 94.5 percent to HK$533.8 million last year, accounting for 15.6 percent of its total earnings, while 10 percent of total profits came from the mainland, where loans grew 65 percent last year.

The bank, chaired by David Li, hopes that deposit business on the mainland will surge 150 percent in 2007.

The fast-growing mainland operation helped lift the bank's net profit to HK$3.43 billion, or HK$2.22 a share, compared to HK$2.75 billion, or HK$1.82 a share, in 2005.

"Our first priority for BEA China will be to convert our remaining representative offices in Dongguan, Fuzhou, Suzhou, Tianjin and Wuhan into branches. We will add 10 more outlets in the mainland this year in addition to the current 31," said Li.

Incorporating on the mainland might help BEA take a 20 percent or greater stake in a domestic lender, he said.

Overseas bank holdings on the mainland are currently limited to 20 percent.

Analysts expect BEA to be among the first overseas banks to incorporate on the mainland this year to enjoy wider access to the retail banking market.

The bank is expected to deliver consistent 15 percent to 20 percent earnings per share growth over the next two years, analysts said.

HSBC Securities is also optimistic about BEA's earnings growth and expects it to provide its mainland subsidiary an initial capital base of more than HK$5.5 billion to encourage future asset growth.

However, Credit Suisse said in a report that BEA might not enjoy as much 'privilege' after several large Hong Kong lenders obtained approval to incorporate locally on the mainland. 

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